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For-Profit Education Stocks: Which Will Outperform in 2011?

Strayer executives said negative publicity and uncertainty regarding proposed regulations surrounding the for-profit education sector in recent months led to the student enrollment decline.

The company's statement echoed cautionary statements on student enrollment from school stock peers such as Corinthian Colleges, Capella Education (CPLA) and ITT Educational Services (ESI).


Education-providing institutions will also be required to limit student enrollment to those who have high school diplomas or can readily demonstrate their readiness for university-level education. Schools must also comply with what is called the 90:10 rule in fiscal 2012. The rule stipulates that no more than 90% of a for-profit education provider's revenue may be generated from Department of Education's federal student aid program.

Federal aid to for-profit education providers came to nearly $150 billion in the last academic year.

The highly controversial "gainful employment" rule, would sharply limit for-profit schools' access to federal aid and could be finalized as early as this month.

"The educational services sector lacks a hard catalyst other than the Department of Education's widely anticipated publication in [2011's first quarter] of the final version of gainful employment," noted RBC Capital Markets analyst Robert. C. Wetenhall.

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